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Property agents in race against en bloc clock

Posted by luxuryasiahome on April 9, 2008

Sites relaunched at lower prices as collective sales agreement deadlines loom

Property agents are expected to keep pushing out a steady stream of relaunched en bloc sales over the next few months, as they attempt a last hurrah before their collective sales agreements (CSAs) inked last year expire.

Asking prices for such sites this time round are about 10-20 per cent lower than last year. Agents hope developers will bite, given their strong participation in recent government land tenders.

‘Whatever collective sales that went into the market in the third or fourth quarter of last year and which are not yet sold, you can expect their CSAs to expire around mid-2008 or Q3 this year. So the current second quarter is pretty much the only window of opportunity for the sellers and agents to make a last try,’ a seasoned agent in the en bloc sales business says.

Data from Credo Real Estate show there were 14 en bloc sale sites launched in Q3 last year but which are still unsold, while another 30 launched in Q4 last year have yet to find takers. These include The Riverwalk, Elizabeth Towers, Cairnhill Mansion, Grange Heights, Chancery Court, Thomson View Condo, Villa delle Rose, Spanish Village, Estoril and Vista Park.

From the time the minimum 80 per cent consent level is secured for a CSA, agents have up to 12 months to find a buyer and submit an application to the Strata Titles Board for an order for the collective sale.

Says Colliers International executive director of investment sales Ho Eng Joo: ‘We can expect to see a rush on the part of owners and agents to take another shot at the market. If you don’t do that, the old CSA expires and any fresh attempt at an en bloc sale will fall under new rules that took effect last October – and these are a lot more onerous.’

Colliers yesterday relaunched Amber Glades along Amber Gardens with an indicative price of about $127 million or $1,140 psf per plot ratio, inclusive of development charges. This is about 15 per cent lower than the $1,345 psf ppr sought by Amber Glades’ owners in October last year.

In recent weeks, Landmark Tower in Chin Swee Road, Pinetree Condo in the Balmoral area and Royalville in Bukit Timah have also been relaunched at indicative prices ranging from 10-20 per cent below what they had been offered at in Q3 or Q4 last year.

Typically, these sites are being relaunched under the existing CSAs and based on the same reserve prices as last year. However, this time round, owners’ asking prices are closer to reserve prices, whereas last year, the asking prices may have been pegged at a significant premium to the reserve prices, market watchers say.

Some agents are also believed to be in discussion with owners who’ve signed a CSA to see if they are willing to sign a supplementary agreement to lower the reserve price.

Savills Singapore director Steven Ming says: ‘The initial asking prices were a bit lofty when the sites were launched last year. That was when the market was still exuberant. As the sub-prime crisis set in, confidence weakened and home sales slowed. Developers have had to factor this in when pricing their bids for en bloc sites.

‘They also have to take into account higher construction costs and with the ongoing credit squeeze, the opportunity cost for putting in more equity into the project.’

Knight Frank managing director Tan Tiong Cheng has this advice for en bloc sellers: ‘Developers are no longer prepared to pay the price owners had expected last year, but if you can still collect a premium from an en bloc sale than if you were to sell your unit on your own, why not adjust your pricing and collect the windfall? You may also be able to take advantage of a more subdued market to shop for a replacement property.’

Besides the pressure of looming CSA expiry dates, market watchers point to another factor in the impetus for the current wave of en bloc sale relaunches: the strong bidding at recent state tenders, for instance, for a reservoir-fronting condo site in Yishun and a ‘white’ site at Serangoon Central. ‘This has brought back a bit more confidence in the market,’ says Credo Real Estate managing director Karamjit Singh.

‘Property bigwigs like Mr Kwek Leng Beng and Mr Liew Mun Leong have also come out to say they remain confident about prospects for the Singapore property market, but that we need time for sub-prime to clear before we see activity coming back again. If there were a barometer to measure the mood of the day in the property market, April’s measure appears to be slightly better than March,” he says.

Source : Business Times – 9 Apr 2008

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Prices of high-end condos starting to fall as sales dwindle

Posted by luxuryasiahome on April 9, 2008

Downward trend may continue for next few quarters, experts predict

HOME prices are starting to fall, as several high-end properties begin to feel the squeeze of retreating buyers.

Sales of Singapore’s most expensive condominiums – all the rage last year – have dwindled to just a trickle this year.

And with plunging sales, prices have also started to dip, although official figures have yet to reflect this trend.

Early signs of the slide lie in the handful of caveats filed involving many luxury projects in the first quarter. These showed prices fell from the previous quarter, in some cases by up to 20 per cent.

In Districts 9 to 11, Singapore’s creme de la creme of residential locations covering Orchard, Holland and Bukit Timah, average prices have fallen by about 30 per cent since the beginning of the year, according to caveats.

They dropped to an average of $1,564 per sq ft (psf) between January and March from $2,023 psf in the preceding three months.

In luxury island enclave Sentosa Cove, almost all condos posted drops in average psf prices, ranging from 2 per cent for the Marina Collection to 23 per cent for The Azure.

Property experts say this could be because luxury home buyers are now selecting only the most competitively priced properties.

‘Market activity is very slow now, so any transactions that do take place are likely to be from people who have found attractive buys,’ said Mrs Ong Choon Fah, the executive director at property firm DTZ Debenham Tie Leung.

She said high-end properties in the traditional prime districts were more dependent on investor buying, so they could be more affected by the current global credit crunch and weaker sentiment.

‘A lot of people who bought luxury homes are also ’specuvestors’, so they may be happy making just a small profit and selling quickly,’ Mrs Ong explained.

The Government estimated last week that private home prices continued to climb in the first three months of the year, albeit at a slower pace. They rose 4.2 per cent, down from 6.8 per cent in the previous three months.

In the priciest segment, the core central region, the price gain dropped to 4.4 per cent from 7.5 per cent in the previous quarter. This region covers Districts 9 to 11, the Marina Bay area and Sentosa.

Anecdotal evidence from property insiders and caveats lodged, however, showed that prices at many projects fell rather than rose this year. At Scotts Square in Scotts Road, only two units have been sold so far this year – at an average price of $3,700 psf, down from $4,000 psf for 42 units in last year’s fourth quarter.

Similarly, at The Oceanfront @ Sentosa Cove, the most recent deals were in February, where three units were sold at $1,720 to $1,751 psf. Just six months before that, 15 units were sold at an average price of $2,480 psf.

Other high-profile, pricey condos, such as the Marina Bay Residences and The Marq on Paterson Hill, have yet to see a single caveat lodged this year.

But the story is not all bad. The Orchard Residences, which holds the title of Singapore’s most expensive condo, has sold only one unit this year – but at $4,700 psf, higher than most of its other sales.

Other older condos in areas such as Cavenagh or Balmoral may also be trading at higher prices from their previously low base, pushing up the overall prices for the whole district, suggested Mr Ku Swee Yong, director of marketing and business development at Savills Singapore.

But he said the price index for high-end homes may be under pressure in the next two quarters, now that ‘everyone wants a bargain’.

‘You only need developers to start giving discounts or people starting to buy lower-

floor units instead of penthouses. That will push the index down and put pressure on prices.’
 
Source : Straits Times – 9 Apr 2008

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JLL, Aussie firm in tie-up to manage malls

Posted by luxuryasiahome on April 9, 2008

JV will tap regional market with focus on China, India

JONES Lang LaSalle has teamed up with Australia’s Colonial First State Property Management to launch a retail property management venture, the first of its kind in Asia.

The 50:50 company, Sandalwood, will aim to tap into a growing market for retail malls in particular, with China and India being the prime areas of focus.

The Singapore-based firm will help developers and landlords in the development and management of shopping centres, with its existing ambit covering around 40 malls in the region. It will also provide consultancy and leasing services.

Between 2006 and 2012, an estimated 1,000 malls are being built in the region, according to Jones Lang LaSalle.

‘This is our most significant investment in our retail business in the region,’ Jones Lang LaSalle chief executive officer (Regional Business Lines & Corporate Solutions) John Forrest explained.

‘Retail is also quite a specialist thing. With shopping centres it’s much more of a living entity, and a key driver for why we wanted to bring in Colonial, with its depth of experience in managing malls.’

Colonial First State Property is one of Australia’s largest property development, management and leasing specialists, having undertaken more than 25 large shopping centre developments since it was launched in 1983.

It currently manages 36 centres on behalf of third party clients across Australia.

According to Mr Forrest, the joint venture will initially focus on Singapore, Hong Kong, China, Macau, Taiwan, Indonesia and India as its key markets.

No details were given on the capital that both firms have injected into the venture.

Around 740 staff from both the companies will move into Sandalwood. The venture officially launches on June 1.

One of Sandalwood’s first major projects will be a shopping mall in Ningbo, China. According to Mr Forrest, Singapore is a market where the joint venture would like to take on a major project that would become a flagship.

He also expects China and India to account for a large percentage of their project work, with retail space in these markets growing amid rising middle class incomes and potent spending power.

According to Jones Lang LaSalle’s latest Retailer Sentiment Survey, the region is experiencing robust growth and optimism.

In all, 76 per cent of respondents in the poll said that they anticipate higher growth in turnover in 2008. Nine out of 10 survey respondents said that they plan to expand their retail operations.

Cities such as Hong Kong have been enjoying a prolonged retail rebound on the heels of strong economic growth and consumer confidence.

January retail sales were more than 23 per cent higher than the same period a year ago, totalling HK$25.7 billion (S$4.5 billion).

However, economists are expecting more modest growth for the rest of the year as inflation begins to bite and consumers wait on the sidelines amid global economic uncertainty.

Although Hong Kong saw its gross domestic product grow by 6.3 per cent in 2007, the government has cited a slowdown in the US and Europe as a possible dampener, with growth this year expected to be in the region of 4 per cent.

Source : Business Times – 9 Apr 2008

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Tapping the Asian market

Posted by luxuryasiahome on April 9, 2008

Private banks are realising there is huge potential for growth in Asia and are confident of a strong year ahead, writes GENEVIEVE CUA

MARKETS are down, writedowns from sub-prime losses aren’t over, and the US is grappling with what some pundits believe may be the worst economic downturn since the Great Depression. Still, private banks that look after the portfolios of Asia’s well-heeled are confident of a strong year ahead.

Merrill Lynch’s head of global wealth management (Asia-Pacific), Rahul Malhotra, expects a 30 to 40 per cent growth in assets this year, for example. That’s just about the pace of last year’s growth.

‘There is growth overall in the Asian economies even with what is happening in the US. Inherently we will see growth come through. People are still making and saving more money.

‘The types of investments clients may make could vary with the climate. In the past perhaps they invested directly in equities. Today there is more focus on fixed income.’

Tjun Tang, Boston Consulting Group vice-president and director, says the outlook remains bright, even if poor market performance may be a dampener. Wealth, he adds, is typically driven by three factors – economic growth, savings rates and a strong investment market.

‘What is interesting in Asia is that we still have strong growth fundamentally in the economies. So, entrepreneurs are still benefiting.’ Most Asians are also shielded from market losses, as they have a greater proportion of wealth in cash, relative to the wealthy in the US or in Europe.

Private bank penetration is also ‘quite low’. ‘In Asia ex-Japan, we’re seeing assets sitting in private banks of less than US$1 trillion. But household wealth across Asia comes to US$16 trillion. A lot of that may not make it to private banks, but many banks are growing by 20 to 30 per cent a year.’

Managing director of Calamander Capital Roman Scott, who used to head Boston Consulting’s wealth management practice, believes the wealth of non-Japan Asia will soon overtake that of Japan. Ten years ago, Japan dwarfed non-Japan Asia’s wealth. By his reckoning, major private banks in Asia have tripled assets under management over five years from US$200 billion to US$600 billion. That may well be underestimated as some banks are reluctant to furnish assets data.

How is a bank to get a larger share of clients’ wallets? Investment banking and corporate finance are one avenue, particularly in the context of Asian clients’ entrepreneurial profile. Credit Suisse managing director Marcel Kreis calls this segment of expertise ‘private investment banking’.

In Asia, entrepreneurs are highly represented among the wealthy, compared to other parts of the world, he says. ‘Almost every client is an entrepreneur, mostly first or second generation owners of businesses with their wealth tied to their business and to real estate.’

‘There are a number of banks that in theory can deliver the integrated bank to clients. In my mind, there are really only very few that can actually do this.’ He expects Credit Suisse’s Asian assets to expand by 20 to 30 per cent annually.

A second strategy is to simply be where the money is. This means setting up onshore centres in the most promising markets. UBS Wealth Management managing director Yeong Phick Fui says the management of domestic wealth is largely untapped. The latter comprises 90 per cent of the total wealth pool. UBS has earmarked a number of markets for domestic expansion, including Japan, Australia, Taiwan and China.

Citi Private Bank managing director and region head (Singapore, Malaysia and Brunei) Tan Su Shan says onshore commitment is a must especially in India and China. ‘(We are) committed to an ambitious onshore build-out in these two economic giants to capture market share.’

Yet another opportunity is to explore issues around inter-generational wealth transfer. Bank Julius Baer chief executive Wilfried Kofmehl says a study by PricewaterhouseCoopers has found that 80 per cent of Asian wealth will be transferred to the next generation in the coming years. ‘The transfer of wealth will have the most crucial impact on how we conduct our business here,’ he says.

That is why banks jostle for a share of mind among the wealthy’s children as well. Most banks now run ‘next generation’ programmes attended by clients’ children to discuss various issues including investments and business succession. Even relative newcomers to the Asian wealth scene are unfazed by the competition.

Lombard Odier Darier Hentsch (LODH), which boasts a two-century pedigree, set up an office here just this year. LODH deputy chief executive Richard Wee expects the bank’s Asian assets to reach US$2 billion within two years. He says the bank’s niche offering and a reputation so far untarnished by sub-prime exposure will offer an edge.

‘(Clients’) biggest concern is the retrenchment exercises of banks who are most affected by sub-prime losses, in particular the banks which emphasised market share rather than profitability as a growth objective. Turnover causes distress to our private clients.’

Meanwhile, finding good bankers surely remains one of the biggest and most stubborn challenges that banks face. Over the last couple of years, the frenetic drive for bankers saw compensation levels skyrocket.

Nick Hughes of Fox Partnership, which specialises in top level hires in wealth management, says: ‘Last year banks were quite reactive. It was a case of winning market share and paying to get bankers in with established books of assets under management.

‘Now people are showing more caution. Instead of bringing in five bankers, they may say – we’ll take two very good bankers who we know can produce results. Bankers are having to be very accountable this year. I don’t think it’s all doom and gloom. Some of the packages are still unbelievable. But they have to be very accountable.’

ABN Amro Private Banking Asia head Barend Janssens says: ‘(Banks) are looking for private bankers to generate at least US$5 million in revenue. Strong product knowledge and being able to generate revenue (but not to the point of product pushing) are skills in demand now. Clients are also more savvy.

‘Private bankers who listen to what their clients want, have their trust and exercise integrity will leap ahead as they are not product pushers but concentrate on creating value for the client.’

Source : Business Times – 9 Apr 2008

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US home resales fall more than forecast

Posted by luxuryasiahome on April 9, 2008

Losses stemming from mortgage crisis may reach US$1 trillion, says IMF

The number of Americans signing contracts to buy previously owned homes declined more than forecast in February, indicating the US real-estate recession will extend into a third year.

The National Association of Realtors’ index of signed purchase agreements decreased 1.9 per cent to 84.6, the lowest reading since records began in 2001, the group said yesterday. The drop follows a revised 0.3 per cent increase in January.

Falling property values and stricter lending standards are prompting prospective buyers to delay purchases, a sign the housing slump hasn’t touched bottom. Mounting home foreclosures and related losses at financial firms may keep the Federal Reserve cutting interest rates to soften the downturn.

‘I think looking for a bottom in housing is a little premature given the fact we are just beginning to see the first wave of foreclosures,’ Drew Matus, a senior economist at Lehman Brothers Holdings Inc in New York, said in a Bloomberg Television interview. ‘Prices are likely to come down and we expect that to continue for some time.’

Economists had forecast the index would fall one per cent from an unchanged reading previously reported for January, according to the median of 29 estimates in a Bloomberg News survey.

Projections ranged from a decline of 1.5 per cent to a 1.5 per cent gain. Compared with a year earlier, the measure was down 21 per cent.

Stocks remained down following the report and Treasury securities were little changed. The Standard & Poor’s 500 index was down 0.5 per cent to 1,366.2 at 10.17am in New York.

The Fed was due to release minutes of its March 18 policy meeting at 2pm yesterday. In the first 11 weeks of this year, the central bank cut the benchmark lending rate two percentage points, the fastest drop in two decades. Analysts will be eager to see how officials viewed the unravelling of money markets that prompted them to pass new liquidity backstops.

Former Fed chairman Alan Greenspan said yesterday the drop in US home prices will probably end ‘well before’ early next year as the number of houses on the market diminishes, aiding an economic rebound.

The International Monetary Fund yesterday said financial losses stemming from the mortgage crisis may approach US$1 trillion, citing a ‘collective failure’ to predict the breadth of the crisis.

The Realtors forecast existing-home sales in 2008 would fall to 5.39 million compared with 5.65 million last year. Purchases of new homes will decline to 576,000 from 775,000 in 2007, the group said yesterday.

The pending figures are considered a leading indicator of resales because they track contract signings. The purchase data, due later this month, reflects closings, which typically occur one or two months later.

Sales of existing homes unexpectedly rose in February from a nine-year low, the Realtors group said on March 24. Purchases increased 2.9 per cent to an annual rate of 5.03 million.

Sales of existing homes are down 31 per cent from their September 2005 peak, while inventories are at a 9.6-month supply. The group has said a five to six-month supply reflects a balanced market.

The housing slump has hurt the economy in various ways. Declines in residential construction have reduced gross domestic product since early 2006 and now falling home prices are curbing consumer spending.

The drop in values reduces household wealth and limits the amount of equity owners can tap to boost spending. — Bloomberg

Source : Business Times – 9 Apr 2008

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Fewer home loans taken up as property market cools further

Posted by luxuryasiahome on April 9, 2008

Mortgage default rate also falls but some banks see refinancing deals rise

The number of home loans taken up has fallen sharply in recent months as the property market continues to contract.

Only 4,200 new home loans were approved in January, up about 13 per cent on the 3,722 in December but down 21 per cent from the peak of 5,319 last August.

The Credit Bureau of Singapore figures also show that 2,544 second mortgages were taken up in January, a 31 per cent drop from the high of 3,698, also last August.

‘We expect the growth in new mortgages to slow further this year,’ said Credit Bureau general manager Mark Rowley.

Inquiries for new home loans have also dropped, down to 8,923 in February, the lowest since April 2006.

Mr Gregory Chan, OCBC Bank’s head of consumer secured lending, said: ‘We have observed that property buyers are becoming more cautious in their purchase decisions.’

United Overseas Bank’s (UOB’s) head of loans, Mr Kevin Lam, said that ‘in line with property sales transactions, our loan applications were slower in January and February’ but there was ‘a pick-up in market activity at the end of March’.

His counterpart at HSBC Singapore, Ms Alice Chia, said the bank has ’seen a reduction in applications for new home loans, which is reflective of sentiment towards the property market’.

But she pointed to one area where banks are getting increased business – more people are re-mortgaging their home to take advantage of the declining interest rate environment.

‘We have seen an increase in the number of refinancing applications over recent months,’ she said.

Maybank and OCBC have also encountered more home owners looking to refinance.

Ms Helen Neo, Maybank’s head of consumer banking in Singapore, said it launched financing packages in February ‘catering to customers seeking refinancing’ and has received ‘an encouraging response’.

However, Standard Chartered and UOB said they have not seen a significant increase in customers wanting to refinance.

The Credit Bureau figures also revealed certain more positive aspects of the mortgage market.

The number of delinquent account holders has fallen to 4,636, or just 1.63 per cent of total mortgage holders – the lowest in two years.

This allays concerns raised during the speculative frenzy last year that some buyers would overstretch by taking on loans they could not afford.

Mr Rowley said the lower delinquency rate is ‘a good sign’ that Singapore customers are creditworthy, even as loan amounts have risen steadily.

The increase in the number of home owners with significantly larger mortgages has also been striking.

There were 7,404 home owners with outstanding balances on their mortgages of over $1 million in January. This was an 81 per cent jump over February last year. This segment makes up almost 3 per cent of the total number of mortgage holders in Singapore.

Source : Straits Times – 9 Apr 2008

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Cutback in bank lending puts US economy at risk

Posted by luxuryasiahome on April 9, 2008

Minimum capital ratio requirements limit banks’ ability to dish out loans

Bank holding companies including Citigroup and Bank of America have the thinnest safety cushion against losses in seven years.

The margin may erode further in coming weeks. Credit ratings on US$704 billion of bonds have been cut this year following the collapse of the US housing market.

Sheila Bair, chairman of the Federal Deposit Insurance Corp, said last week that the downgrades may compromise bank capital ratios enough that some of the largest institutions will no longer be considered well capitalised.

Falling below a regulatory benchmark that is intended to maintain a minimum level of capital to protect depositors against losses would subject banks to more scrutiny from regulators than they have ever experienced.

‘This is a nightmare for the country,’ said William Isaac, who was chairman of the FDIC from 1981 to 1985.

Banks will ‘raise what capital they can, then they’ll slow down their growth and stop lending, and what should be a mild recession becomes a much more serious one.’

The biggest danger to the economy is that to preserve their ratios, banks will cut off the flow of credit, causing a decline in loans to companies and consumers.

Banks have already raised US$136 billion in capital and cut dividends. More stock sales and payout reductions are likely to follow, says analyst Meredith Whitney at Oppenheimer & Co.

The credit crunch has already cost the world’s biggest financial companies about US$232 billion.

‘Banks have to maintain their ratios,’ said Dennis Santiago, chief executive officer of Institutional Risk Analytics, a Californian research firm that monitors banking statistics. ‘This is an institutional panic. At what point will consumers feel the panic? I don’t know.’

The banks need to shore up the ratio of the value of their common stock, preferred shares, retained earnings and loss reserves to the total of risk-adjusted assets, which are affected by credit ratings.

To be considered a ‘well capitalised bank’ by US regulators, an institution cannot have more than 10 times its capital in risk-weighted assets. More than 99 per cent of American banks qualify as well capitalised.

As a group, regulated banks had a total risk-based capital ratio of 12.79 per cent at the end of last year. The figure was the lowest since 2000, before the last US recession.

The holding companies for Citigroup, Bank of America and Wells Fargo have the lowest ratios in at least the five years that the Federal Reserve has been tracking the data.

Citigroup had stock, retained earnings and preferred shares in 2007 equal to 10.7 per cent of its risk- weighted assets. That’s down from 12.02 per cent in 2005.

Wells Fargo was at 10.68 per cent, down from 11.76 per cent, and Bank of America, 11.02 per cent, down from 11.08.

By contrast, the average ratio for the nation’s 66 biggest bank-holding companies was 11.63 per cent. JPMorgan Chase had a ratio of 12.57 per cent, up from 12.04 per cent.

Fed chairman Ben Bernanke described bank capital requirements in congressional testimony April 2 as ‘the nub of the problem’ and said US institutions had ‘hunkered down’ and were lending less.

‘The important thing to remember about capital ratios is that they are minimums,’ said Ralph Sharpe, a lawyer at Venable LLP in Washington, who was director of the Office of the Comptroller of the Currency’s enforcement and compliance division from 1984 to 1994.

‘In good times everybody looks good, but when the tide goes out, you see who is not wearing their bathing suit.’ – Bloomberg

Source : Business Times – 9 Apr 2008

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Singapore likely to escape technical recession

Posted by luxuryasiahome on April 9, 2008

The Singapore economy probably rebounded in the first quarter, escaping a technical recession.

A Today strawpoll of seven private sector economists shows all those surveyed expect the Government to announce positive GDP growth, when it unveils flash GDP estimates for the first quarter tomorrow.

“But the question is: is there a sustainable demand in the pipeline?” said Mr Vishnu Varathan, an economist at research house Forecast. “There is no compelling reason to suggest that we are on a roll and it is going to get better as we go.”

Their median forecast for quarter-on-quarter growth came in at 11.7 per cent. This, thanks to a sharp swing in biomedical and electronics exports.

However, forecasts vary considerably – from a low of 5 per cent from OCBC Bank to a bullish 19 per cent by Citigroup.

If the first quarter figure had been negative, Singapore would technically be in recession having suffered two successive periods of quarter-on-quarter contractions.

On a year-on-year basis, economists surveyed had a median forecast of 6.3 per cent growth, with forecasts of 5.2 to 7.8 per cent.

However, many warn the worse is yet to come.

OCBC economist Selena Ling said: “We will feel the effects of recent developments in the second quarter. It all depends on how the US economy ends up, how much the credit fallout affects the financial services here.”

Despite the sub-prime crisis hitting financial markets worldwide, Ms Ling said there were no signs of bank loans growth and tourism slowing for now.

Economists were caught off guard in the final quarter of 2007, when the Government announced a surprise 4.8 per cent decline in GDP, due mainly to volatile pharmaceutical exports.

The Monetary Authority of Singapore will also be holding its twice-yearly policy review tomorrow.

Economists widely expect it to retain its current policy stance of allowing modest appreciation in the Singapore dollar, having slightly steepened its trading band since last October.

The currency has risen 4.2 per cent this year against the US dollar, the third best performer in Asia outside Japan during the period. This effectively lowers the cost of imports, but erodes the cost competitiveness of exports. – Cheow Xin Yi

Source : Today – 9 Apr 2008

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Greenspan: US home prices may stabilise this year

Posted by luxuryasiahome on April 9, 2008

Former US Federal Reserve Chairman Alan Greenspan said the drop in American home prices will probably end “well before” early next year as the number of houses on the market diminishes, aiding an economic rebound.

“It will not be until early 2009 that we will be close to having eliminated most of this home inventory,” Mr Greenspan said yesterday. “But it is very likely that home prices will stabilise well before that.”

Mr Greenspan said the health of the United States housing market is tied to broader financial markets that rely on bundling mortgages to sell as securities.

His successor, Mr Ben Bernanke, and other Fed officials highlighted declining home prices as a major economic risk that may hurt household wealth and consumer spending.

“Once the markets start to stabilise, especially if the real economies don’t go into a severe recession we can expect a recovery to begin to take place,” Mr Greenspan, 82, said.

Mr Greenspan described the current credit crisis as the worst in at least 50 years, adding that the extent of damage stemming from the collapse of the sub-prime market would not be known for months.

“Have we reached a point where prices are stable? We cannot know that for a couple of months,” he said. “It looks as though we’re going to get a very large rate of liquidation, but not until the second half of this year.”

Source : Today – 9 Apr 2008

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End of the free ride for US consumers

Posted by luxuryasiahome on April 9, 2008

Asian inflation and a weaker greenback are driving up US consumer prices

The free ride for American consumers is ending. For two generations, Americans have imported cheap goods from low-wage countries – first Japan and Korea, then China and now places like Vietnam and India.

But inflation in the developing world, especially Asia, is threatening this. And it is not just limited to China – where rising energy and labour costs have made exports to the United States more expensive – but also in countries with lower production costs.

“Inflation is the major threat to Asian countries,” said Mr Jong Wha Lee, head of the Asian Development Bank’s office of regional economic integration.

It is also a threat to Western consumers because Asian exporters, even in very poor countries, are passing on their rising costs.

Developing countries have experienced bouts of inflation. Some are famous for them, like Brazil, which experienced triple-digit inflation in the late ’80s and early ’90s. But two factors make this time different and promise to push prices higher in the US, just as the possibility of recession looms.

First, developing countries now produce nearly half of American imports. Second, inflation in these countries comes when many of their currencies are rising against the US dollar.

This puts US consumers in a double bind, paying at least some of producers’ higher costs for making their goods and higher prices on top of that because the dollar buys less in those countries.

Asian businessmen say they do not have a choice. “This is a tough time to do business,” said Mr Le Hoai Vu, sales manager for Quang Vinh Ceramic in north Vietnam.

The company has increased by up to 10 per cent prices for hand-painted vases because labour costs are rising 30 per cent a year.

Overall prices in Vietnam rose 19.4 per cent between March 2007 and March 2008.

In China, Foshan Shunde Augustus Bathroom Equipment is about to raise prices by 10 per cent for bathroom fixtures exported to North America.

“Rising inflation is a way of life in China these days, you see it everywhere,” said its international business supervisor Faye Kong.

The cost of American imports from less-industrialised countries as a group is rising. A Bureau of Labour Statistics index of average prices for imports of manufactured goods from such countries fell gradually through early 2004. But it is now rising briskly and was up 5.6 per cent in February from the same month last year.

This contributes to rising inflation in the US. In the 12 months through February 2008, the prices of goods in the US increased 4 per cent, according to the government’s consumer price index.

But so far, Asian exporters have passed along only a portion of their costs. The US dollar’s weakness is a cause of inflation in developing countries, especially those that barely let their currencies rise against the greenback to hold on to export markets.

Ms Teresa Gau, a fishmonger in Taipei, is charging up to a third more for fish and crabs than she did a year ago, as fishing boat owners charge more to cover higher diesel costs.

In Vietnam, Quang Vinh Ceramic’s fastest-rising expense is for blue ink for painting pottery. Imported from Belgium, the ink is priced in euros and has soared 80 per cent over the last year in Vietnamese dong.

Keeping the dong inexpensive in US- dollar terms has not only helped Vietnam increase exports by 24.1 per cent last year, but also lured a flood of investment. Bank loans rose more than 50 per cent last year, feeding a real estate frenzy that has not yet abated.

Brick kiln owners like Mr Le Thi Hop in Vietnam have responded by tripling prices in the last year. “Most people who buy my bricks say the price is crazy, but I say, ‘This is the market’.”- New York Times 

Keith Bradsher

Source : Today – 9 Apr 2008

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